If the on-again, off-again tariff announcements by President Trump have struck you as unusual, that’s for good reason. Nothing like this has ever happened before.
That’s the estimation of Douglas Irwin, a Dartmouth economic historian whose 2017 book, “Clashing Over Commerce: A History of US Trade Policy,” is the leading work on the subject. I called him for perspective. He told me that what we were experiencing was way outside the historical norm. One man alone has risked the first global trade war since the 1930s by raising tariffs to levels unseen for more than a century. The president’s actions, he said, represent a “big break with history.”
Even if Mr. Trump removes the tariffs — he announced a 90-day pause for some of the highest ones on Wednesday, while keeping a 10 percent base line for virtually all imports from around the world — his go-it-alone stance is a major departure. However the trade saga develops from here, the first skirmishes in a trade war, a dreaded relic of the Great Depression, have begun in the 21st century.
The consequences are still unfurling, but the stakes are high. They include the possibility of a global recession and geopolitical shifts that may not be in the interests of the United States — all occurring because of the swiftly shifting decisions by the president of the United States.
Until now, it had always taken decades of consensus building to bend the trajectory of trade policy, Professor Irwin said. When the country changed course in earlier times, Congress played the dominant role. Even when it began delegating authority to negotiate trade deals to the president in the 1930s, Congress set the direction of U.S. tariffs: downward.
Now, it’s unquestionably the president who has taken the United States on a new and hazardous path. “This is of historical significance,” Professor Irwin said.
In the past, wars provided the impetus for change. The Civil War and World War I led to higher tariffs enacted by Congress after lengthy discussion, and those were “big breaks” with history, Professor Irwin said. Tariffs began falling in the Franklin D. Roosevelt administration, and with some exceptions, including the Biden and first Trump administrations, they remained fairly low.
“But here we are, in a peacetime economy,” Professor Irwin said. “We’re basically at full employment, 4 percent. There’s no societal consensus that there’s a big problem with trade, and yet we have one person, the president, radically changing the direction of U.S. trade policy.”
The Fallout
Stock markets have been swirling — falling for days, then leaping in delight on Wednesday at news that some of the U.S. tariffs had been delayed. It was the biggest one-day gain since the financial crisis of 2008, with the benchmark S&P 500 stock index rising 9.5 percent and erasing some of the losses that investors have had to endure this year. By Thursday, though, the enthusiasm had ebbed. The S&P 500 fell 3.5 percent for the day, only to rise 1.8 percent on Friday.
Whether the markets keep rallying, or sink back into a maelstrom of worry, is likely to depend on what Mr. Trump does about the direction of tariff policy, which economists view, in an overwhelming consensus, as wrongheaded and profoundly dangerous.
Until Wednesday, the president’s series of tariff announcements had set off expectations of sharply rising prices for households and businesses alike, raising a strong possibility that a spreading global trade war could send the U.S. economy spiraling into a recession and cause vast human hardship.
After the president said he was delaying some tariffs, Goldman Sachs abruptly dropped its forecast that a recession was likely. Even so, the Goldman prognosis was bleak: “We are reverting to our previous non-recession base-line forecast with G.D.P. growth of 0.5 percent and a 45 percent probability of recession.”
China has retaliated with tariffs of its own. By Thursday, U.S. tariffs on Chinese goods had reached 145 percent; China reciprocated with tariffs on U.S. products, raising them on Friday to 125 percent. Negotiations were underway with many countries — but not China — the Treasury secretary, Scott Bessent, said. “Do not retaliate,” he said, “and you will be rewarded.” The European Union said it would delay its plans for retaliation for 90 days.
Congressional resistance to the Trump trade policy has begun, with a mainly Democratic effort in the Senate to end the “national emergency” that the president declared as the legal justification for his tariffs. But as my colleague Ana Swanson wrote, the odds against such an effort’s succeeding quickly are high. Even if it passed in the Senate, it’s not clear that a resolution to roll back the tariffs would ever reach the House floor. If it did, and passed there, Mr. Trump could veto it, and overriding a veto with a two-thirds vote isn’t likely in the current political firmament.
The Sweep of History
As unusual as the Trump administration’s swerves on tariffs have been, they are possible only because Congress has been delegating authority on trade policy to the president in stages, starting in 1934.
Article I, Section 8 of the Constitution expressly reserves for Congress the power to impose tariffs.
Congressional dominance over trade policy shifted substantially after the Smoot-Hawley Tariff Act of 1930 ushered in the catastrophic global trade war and worsened the Great Depression. Then, as now, economists overwhelmingly opposed a tariff increase, imploring President Herbert Hoover not to sign the bill into law, but he did anyway.
That disastrous legislation was a product of what historians call congressional “logrolling” — the trading of votes by legislators to secure favorable action on projects of interest to each one — that had largely determined trade policy. U.S. tariffs in the 1930s increased for domestic reasons — largely, to protect local industry — without much advance thought about the global consequences.
With the benefit of hindsight, it’s evident that the tariffs were major factors in a dire turn in world history, said Dale Copeland, a political scientist at the University of Virginia. In the 1930s, Britain and France turned inward and focused their commerce within their imperial empires, while the United States, a nascent power, had a sphere of influence of its own, Professor Copeland said.
Japan did not yet have such an empire. It set about acquiring one in China and in Southeast Asia, at least in part, because within a year of the enactment of Smoot-Hawley, Japan had “lost most of its trade” and decided that it needed “other ways to get supplies of raw materials and oil and other important things,” Professor Copeland said. Tariff barriers created enormous international tensions and perverse incentives, lessons that “the world has already learned, and may need to relearn now,” he said.
Ed Clissold, senior U.S. strategist at Ned Davis Research, an independent financial research firm, said the geopolitical implications of rising tariffs needed to be studied closely. “If we cut off trade with China and raise tariffs on other countries in the region, China’s going to focus even more heavily in Southeast Asia,” he said.
Emily Bowersock Hill, chief executive of Bowersock Capital Partners, a wealth management firm in Lawrence, Kan., said that without checks on his behavior, Mr. Trump was making erratic geopolitical moves.
“It’s taken decades to establish the reputation of the United States around the world,” she said. “Our reputation, our alliances, our brand were a primary advantage. It wouldn’t take much to lose all of that.”
The U.S. presidency has always been powerful, but in the past, presidents were hemmed in by law, custom and politics. As the wild swings of recent days show, however, Mr. Trump is unaffected by most of those restraints. More than in the past, the direction of the markets and the global economy depends on the mood of the president.
